Peru-Australia FTA Spur Business Opportunities for Australians

The long-awaited Peru-Australia free trade agreement has finally been signed by Malcolm Turnbull, the Australian Prime Minister and Steven Ciobo, the Australian minister of trade and investment. What are the new business opportunities arising from this new agreement between the two nations?

Under this agreement, it has been calculated that 99% of tariffs that Australians exporters face today will be eliminated. Peru is one of the fastest-growing economies in Latin America. It has an average growth rate of 5.9% over the last decade. This gives Australia a direct and tax-free access to more than 30 million consumers.

This FTA is a direct consequence of the recent collapse of the TPP (Trans-Pacific Partnership), as Canada followed the United States by pulling out of the negotiation table at the last-minute. Australia, just like Peru, needed to secure a strong FTA in order to ensure their exports wouldn’t be affected. 11 countries of the TPP will be meeting again in December to further negotiate the TPP, so hope is not lost. In the meantime, Australia and Peru will be able to trade freely. This also explains why the trade deal negotiations were particularly short, and the agreement signed so soon.

Australian farmers from Queensland are particularly rejoicing over the Peru-Australia FTA. Australia’s exports of sugar having gradually dropped in the previous years, many sugarcane growers are finding it difficult to stay in business. And the recent cyclones haven’t helped either. Based on current prices of raw sugar, this trade agreement will deliver an extra $13.5 million to sugarcane farmers, according to the lobby group Canegrowers.

Great opportunities for sugar farmers in Queensland

The opening of the Australian sugar market in Peru is the biggest achieved in the last twenty years. It is said that it is worth the equivalent to roughly 30% of Peru’s imports. It has been calculated that Australia will be able to export 30.000 tonnes of sugar into Peru every year, and within five years this will grow up to 60.000 tonnes. So indeed there is great potential in the Australian sugar business.

Other industries that will be boosted by the Peru-Australia FTA.

The Peru-Australia FTA is going to boost a great number of key agricultural commodities. These include beef and sheep meat, rice, dairy products, almonds and wine.

Within five years, tariffs on beef will see cuts (the highest being 17% today). This ensures that Australia’s exported beef will stay competitive against the beef exported by the US.

Concerning dairy products, Australia will have duty free access to 10 000 tonnes in five years. And for rice, Australia will be able to export 14 000 tonnes per year freely within five years.

Mining sector predicted to grow accordingly:

Peru is known for its productive mining industry – the top export sector in the country, accounting for over 15% of its GDP and 59% of its total exports in 2016. The Peru-Australia FTA promises duty-free access to mining machinery and parts, the trade of iron, steel and aluminum, mining equipment and base metals. The Australian mining IT companies are therefore going to be able to export equipment free of taxes, and this will boost Peru’s mineral extraction accordingly. This is, therefore, a win-win situation for both countries.

Very promising opportunities for the Wine industry in Australia:

Australian winesare very present in the European Market, but why is it that they aren’t in Latin America? It is simply because the Latin American region and its countries all share various trade deals with other winemaking countries, consequently leaving Australia without a share of the market in the region.

This is the case in Peru, which holds very strong bilateral free trade agreements with the US and Canada, and a trade deal with the European Union. This means that it is actually cheaper for Peruvians to import French wines then it is to import from Australia.

Export your Australian wine duty-free to Peru

But this is going to change with the Peru-Australia FTA. The Winemakers’ Federation of Australia is looking forward to the upcoming trade opportunity, which will eliminate the previous tariff of 9%/bottle exported. This will turn the tables for Australia and lead to an increase in the number of Australian wines on wine lists throughout Peru.

How to manage a safe export?

Now that exporting is duty-free for the vast majority of goods to Peru, you may be thinking of trading your merchandise. However, it is not because there is a Peru-Australia FTA that the whole process has become drastically easier. We would advise you to seek professional support in order to ensure you won’t encounter any problems. A trade lawyer in Peru can organize your export quickly and efficiently by taking care of the necessary paperwork and documentation the customs will request.

Biz Latin Hub precisely offers those services. Our team in Lima is made of expert trade lawyers and accountants. We offer legal and accounting support to foreign companies investing in Lima and Latin America as a whole. If you’re a keen Australian entrepreneur searching to expand your market to Peru, don’t hesitate to contact Craig, our Australian manager at [email protected]to see how we can assist you!